Income tax deduction in concern

with
COMPANIES

HARPAL SINGH
HANSDEEP KAUR
 INTRODUCTION

The government of India imposes an income tax on taxable income of individuals,

Hindu Undivided Families (HUFs), companies, firms, co-operative societies and
trusts (identified as body of individuals and association of persons) and any other
artificial person. Levy of tax is separate on each of the persons. The levy is governed
by the Indian Income Tax Act, 1961.

Deduction is the amount, which is reduced from the gross total income before
computing tax. While exemptions is on income some deduction in calculation of
taxable income is allowed for certain payments.
 DEDUCTIONS
1) a. Contributions given by companies to political parties [SEC. 80GGA(4)]

100% Deduction
There is no limit on the amount of contribution

b. Contributions given by any person to political parties [SEC.

80GGC]
Persons excluding a local authority and artificial juridical person wholly or
Partially funded by the government
100% Deduction

There is no limit on the amount of contribution

2) Profits and gains from industrial undertaking engaged in infrastructural
development etc [SEC. 80-IA]
DEDUCTION allowed-- from gross total income in respect of profits and gains
derived by an undertaking. Different Provisions discussed further:

a. INFRASTRUCTURE FACILITY
100% deduction of the profits and gains for 10 consecutive assessment years
(out of 20).[SEC. 801A(1)]
Infrastructure facility means:
-Toll road, bridge, rail system
-Highway project including housing or other activities
-Water supply project
-Port, airport, inland waterway.

Conditions for deductions:

-owned by company registered in India or any other body constituted under any central or
state act.
-It has entered into an agreement with government for developing, operating
And maintaining infrastructure facility.
-it has started operating infrastructure facility on or after 1April’1995
b. TELECOMMUNICATION SERVICES
100% deduction for first 5 assessment years and for next 5 years @ 30% of
Such profits.[SEC. 80-1A(2) , SEC. 80-1A(2A) ]
Conditions for deduction [SEC. (80 1a(3) & (4)]:
•Operational period
•Underisking to be new
•Plant and machinery to be new

c. INDUSTRIAL PARK OR SPECIAL ECONOMIC ZONE

100% deduction for 10 consecutive years

Conditions for deduction [SEC. (80 1A(3) & (4)]:
*if the undertaking develops, operates and maintains industrial park or special
economic zone in accordance With the scheme of central government.
*Industrial park be setup during the period beginning on 1April,1997 and ending on
31st march 2010.
d) i)generation of power (ii)distribution of power (iii) renovation &
modernization of Existing transmission lines.

100% deduction for any 10 consecutive years out of 15 years. [sec. 80IA(1)(2)]

Conditions for deduction

*undertaking to be new
*Plant and machinery to be new
*Operational period

e)Reconstruction orrevival of power generation plant owned by an INDIAN CO.

[Sec. 80IA(5)
100% deduction for any 10 consecutive years out of 15 years. [sec. 80IA(1)(2)]

Conditions for deduction

-Indian co. should be formed before 30Nov’2005 with majority equity participation
by public sector co’s.
-Should begin to generate or distribute power before 31st march, 2011
3. Profits and gains of an undertaking of enterprise engaged in
development of special economic zone[sec. 80-IAB]
From assessment year 2006-07 and subsequent years.

Notified on or after 1 April’2005 under special economic zone act,2005.

100% deduction for any 10 consecutive years out of 15 years.

Conditions
-Return of income [sec. 80-AC]
-Audit of accounts [sec. 80IA(7), Sec. 80-IAB(3)]
-Double deduction not allowed [sec.80-IA(9), SEC. 80-IAB(3)]
 4. Profits and gains from certain industrial undertakings other than infrastructure
undertakings[Sec. 80-IB]

a) Small scale industrial undertakings[Sec. 80-1B(3)(II)]

30% of profit for compa­nies and 25% for others for 12 years in the case of
Cooperative Societies and 10 years in the case of others.

between 1ST April’1995 and 31st march’2002

b) Industrial undertakings located in backward state [Sec. 80-IB(4)]

Industrial undertaking which begins production or operation between

1st april’1993 and 31st March’2004

100% of profit for initial five years and thereafter 30% for companies and 25%
for other assesses, so that total number of years for which deduction is admissible
will be 12 for Co-operative Societies and ten for others. In case of notified
Industries In North-Eastern Region 100% deduction is admi­ssible for ten
assessment years.
c) Industrial undertaking located in industrially backward districts [Sec- IB(5)]

*category “A” which begins production or operation between 1ST October’94 and
31st March’2002. 100% of profit for initial five years and thereafter 30% for companies
and 25% for other assesses, so that total number of years for which deduction is
Admissible will be 12 for Co-operative Societies and ten for others. In case of notified
Industries in North-Eastern Region 100% deduction is admi­ssible for ten assessment
years.

*category “B” which begins production or operation between 1ST October’94 and
31st March’2002.100% deduction for initial three years and thereafter 30% for
companies and 25% for others for further five years so that the total period for which
deduction is allowable will be 8 years. (12 years for cooperative societies).
d) Industrial undertaking , operating cold chain facility for agriculture produce
[Sec. 80-IB(11)]

Commen­cing Operation Between 1st April’1999 And 31st March’2003.

100% for initials five years and thereafter 30% for companies and 25% for others so
that the total period does not exceed 10 years (12 years for cooperative societies).

e)Business of hotel [Sec. 80-IB(7)]

The Business Of Approved Hotel (Except Those Located   In Calcutta, Chennai, Delh
And Mumbai)And Which Starts Functioning Between 1st April’97 And
31st March’2001.

30% Deduction Of Profit For 10 Years

F) Multiplex Theatre [Sec. 80-ib(7a)]

Starts Functioning Between 1st April’ 2002 And 31st March’2005.

(Except Those Located   In Calcutta, Chennai, Delhi And Mumbai)

50% Deduction Of Profit For 5 Years

G) Business Of Scientific Research [Sec. 80-ib(8a)]

Company Registered In India.

Approved By The Prescribed Authority At Any Time Before 1st April’1999.

100% Deduction Of Profits For Five Years

H) Undertaking Producing Mineral Oil/Natural Gas [Sec. 80-ib(9)]

In Any Part Of India On Or After 1st April’1997 (In Case Of Refining On Or

After 1st October’ 1998)

100% Deduction Of Profits For 7 Years

Business Of Maintaining And Operating Hospitals In Rural Areas

[Sec. 80-ib(11b)]

An Undertaking Which Has Constructed A Hospital In Rural Area During

The Period Beginning On 1st October’2004 And Ending On 31st March’2008.

100% Deduction For 5 Consecutive Years.

5. UNDERTAKINGS OR ENTERPRISES IN CERTAIN SPECIAL
CATEGORY STATES [SEC. 80-IC]
Conditions to be satisfied:
•Return of income to be furnished
•Accounts of enterprise or undertaking to be audited.
•Undertaking should be new
•New plant and machinery to be used.

Sikkim, uttaranchal and north eastern states

Himachal First 5 years Any assessee 100%

pradesh or
uttaranchal Next 5 years company 30%
Sikkim or First 10 years Any assessee 100%
north eastern
states
6) PROFITS AND GAINS FROM BUSINESS OF HOTELS AND
CONVENTION CENTRES IN SPECIFIED AREAS [SEC. 80-ID]

100% deduction for 5 consecutive assessment years.

7. DEDUCTION IN RESPECT OF CERTAIN UNDERTAKING IN

NORTH EASTERN STATES [SEC. 80-IE]

Setup Of Undertaking During The Period 1st April’2007 And 31st March’2017.

100% deduction for 5 consecutive assessment years.

8) PROFITS AND GAINS FROM BUSINESS OF COLLECTING AND
PROCESSING OF BIO-DEGRADABLE WASTE [SEC. 80JJA]

100% deduction for 5 consecutive assessment years.

9) DEDUCTION IN RESPECT OF EMPLOYMENT OF NEW WORKMEN

[SEC. 80JJAA]

30% deduction of additional wages, paid to new regular workmen for

consecutive 3years
10) CERTAIN INCOMES OF OFFSHORE BANKING UNITS AND
INTERNATIONAL FINANCIAL SERVICES CENTRE [SEC. 80LA]

100% deductions of profit for first5 consecutive years

50% for next 5 consecutive years.

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